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The Circular Economy: a New Era for Ecommerce and the Packaging Industry

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Circular Economy and how it affects the packaging industry

Before we can analyse the impact of the circular economy on the packaging industry, it is first vital to understand its basic tenets. In this article then, we’ll start by explaining just what those are. Afterwards, we’ll take a look at the benefits that a circular economy offers the packaging industry as well as the challenges it might pose. Next, we’ll unpack (pun intended) whether or not the single-use cardboard box is viable in a circular economy and take a brief look at an alternative: the returnable packaging model. Finally, we'll think about how e-commerce and the packaging industry can forge ahead successfully in a rapidly changing economic landscape.

Table of Contents

What is a Circular Economy?

A circular economy isn’t a new concept; it’s very much a return to the ‘Make do and Mend’ mindset of the Second World War. Think back too to those glorious days when everybody left their empty glass bottles out for the milkman and many people regularly went thrift shopping.

A circular economy - according to numerous definitions thrown up on the internet - is one in which an economic system is based upon the repairing, reusing and recycling of products instead of throwing them away when they break or cease to be wanted. Within a circular economy you see, built-in obsolescence and shelf-lives will be relics of the past, the idea being that unnecessary waste and pollution is phased out completely. A basic premise of the circular economy is that materials, products and services should be kept in circulation for as long as possible in order to protect the earth’s finite resources.

This approach is directly opposed to the more traditional, linear - and many would say wasteful - economic model of recent times where consumers have been encouraged to buy numerous products and those same products are used and then, relatively quickly, discarded, often to be dumped into landfill because they would be more expensive to repair than to replace. We’ve all heard anecdotal evidence about how it is perfectly possible to manufacture tights that don’t run or snag, except barely anyone does, because profit margins would be negatively impacted. And how frustrating is it when the repair man comes round only to announce that a new motherboard will cost more than replacing the entire still-pristine washing machine?

A basic infographic of what the circular economy is.

In a circular economy however, situations such as these should rarely, if ever, arise. The ability to repair and reuse is pivotal and so, therefore, is the way in which products are designed and manufactured in the first place. Before production takes place, careful consideration is given to raw or recycled materials in order to keep to an absolute minimum any detrimental effect on the planet’s resources. Moreover, products are made to be long-lasting and of the highest quality. It is vital that they fit into three categories: repairable, reusable, recyclable. Bear in mind too, that in a circular economy, the focus doesn’t just rest on products: processes must also be less resource intensive, inclusive, more equitable and even – best of all - regenerative.

In a circular economy, sustainability is not an afterthought, a happy coincidence or a marketing ploy: it’s a beating heart. Already, countries such as Finland are leading the way, adopting the model for themselves and setting out road maps for other countries to follow. The Netherlands, for example, aims to have an entirely circular economy by 2050 and in the USA, the United States Environmental Protection Agency (EPA) is taking steps to promote the model across the Atlantic.

What are the benefits of a Circular Economy?

The philosophy behind a circular economy is that it will benefit everyone and everything: the environment, industry, consumers and communities. The idea is that by adopting such a model, no one will end up downtrodden, disadvantaged or disillusioned. A circular economy has the potential power and reach to fulfil social needs, create new jobs and increase overall prosperity. It can protect vulnerable communities and peoples from contamination and exploitation, thereby elevating social justice, equality and equity.

Within a circular economy, industries would operate in an alternative way in order to minimise waste and play a part in tackling climate change and biodiversity loss. And as climate change continues to dominate the headlines, the benefits of a circular economy seem more and more indisputable. Even those who don’t necessarily believe in man-made climate change can certainly get behind the drive to be less profligate with the earth’s resources. Circular economies require far lower levels of energy than linear ones and the knock-on effects are clear: the use of fewer resources, less pollution, contamination and emissions.

Ultimately, a circular economy would enable eco-systems to recover and regenerate - it doesn’t just take away, it gives back.

 It’s a misconception that the continued overuse of resources is the only way to guarantee economic success. Indeed, the authors of the book Waste to Wealth (Palgrave Macmillan) argue that the old economic model is actually stymieing growth as companies compete for scarce resources and commodities at ever increasing prices.

Any industry – including e-commerce – will benefit from circular business models which are ethical and ecological, providing innovative services and offering products which make them less dependent on scarce resources. In these days of media-savvy customers, a younger more environmentally aware demographic and the cost-of-living crisis, creating longer lasting relationships with consumers, who place the utmost importance on environmentally sound practices, products and packaging is the only way to remain competitive.

Facing challenge: What impact will a circular economy have on the packaging industry?

However huge the environmental, economic and social benefits of a circular economy are, the transition to such a model will come with challenges resulting from the way in which the industry has traditionally functioned. 

Packaging has always generated its share of carbon emissions and the industry as a whole is still energy intensive. Many of its products are single use, for example. Although increasing amounts of packaging are able to be reused or recycled, not every product labelled compostable is actually designed to be put in a home compost bin. Plastics are still widely used and yes, there is a drive towards those made from renewable biological sources that biodegrade, but the fact is that many recycling infrastructures are not yet in a position to be able to deal with them.

When it comes to profit margins, a circular economy doesn't necessarily offer a healthy bottom line fast. The upfront costs necessary to establish such a model won’t blossom into profit immediately. Adopting new technologies to produce innovative, sustainable packaging solutions is more expensive than sticking to existing techniques and truly sustainable materials will cost more to source and produce. Then there’s the acquisition of potential additional inventory in order to ensure less well-established supply chains work effectively. 

But where there’s no pain, there’s no gain. Though tangible benefits will come later, this should not dissuade packaging companies from switching to a circular model as soon as possible and not just because there are potentially huge economic gains to be had. The World Economic Forum warns that if a business is unable to consider transitioning to circular model over the course of the next decade, it will cease to be viable. Soon, it claims, circular economies will outperform traditional ones. To remain competitive and increase their resilience, businesses must act.

Already regulation is being introduced which aims to incentivise circular economies rather than linear ones. Forecasts predict that such regulation will continue to proliferate. In response, packaging companies must start taking steps to ensure that their products are not just compostable, but also widely recyclable and reusable.

Additionally, the obligation to recycle mustn’t rest on the shoulders of the consumer themselves. To adhere to government regulation, ensure ongoing, widespread consumer satisfaction and reap what are potentially huge economic benefits, transition combined with innovation in the packaging industry is crucial. 

The ‘case’ against the single-use cardboard box

So, where does all this leave the humble cardboard box? Though biodegradable and easily compostable, it’s irrefutable that most cardboard boxes are produced to be single use only. This means they make one trip from the factory to the end user. And although cardboard boxes can (and often are) reused time and time again, this is opportunistic and relies on the whim of the customer.

Detractors might therefore argue that the cardboard box is one item that has limited scope in a circular economy: it’s not repeatedly used for its primary purpose and any recycling or composting that does occur is not guaranteed. But the cardboard box is used so widely. Could there be an alternative in returnable packaging?

Box, Send, Return, Repeat: Returnable Packaging

Returnable packaging does as its name suggests: it returns from whence it came. Sometimes known as the closed loop system, packaging is recovered by the business supplying it and reused. Tesco’s online delivery springs to mind with its vans full of green crates which hold your shopping. Once unloaded however, they’re taken back to the store by the delivery driver.

At the end of the day, that’s where the van would be returning anyway: there’s no additional carbon footprint creating journey to consider. Think too of hiring wine glasses for events and parties. Glasses come packed in crates with those integral dividers and plastic inserts (dunnage), which are both protective of their contents and able to be used time and time again. This makes sense when products are destined not only to be dropped off but picked up again too. Other more well-known examples of viable reusable packaging are plastic pallets, racks, bulk and hand-held containers.

Returnable packaging and e-commerce

Being able to benefit from a closed loop system really does depend on what a business does and what its products are. In the e-commerce industry, one size certainly doesn’t fit all and one company might be supplying items that come in thousands of variations in terms of shape and size. 

But does it make sense for e-commerce to look into ways in which their customers could return packaging easily and conveniently for reuse? To a certain extent, this is what the fashion industry already does; returns are an integral and necessary part of the service. The trouble is, in this instance, it’s the item being returned, not the packaging. And if there is no product to return - i.e., zero incentive for a refund - how many customers would actually get round to sending back their paper mailing bag or peel and seal envelope? And, furthermore, what percentage of customers would need to in order to make the process sustainably viable?

Just because something’s reusable doesn’t mean it’s necessarily better for the environment even when compared to a single use item. Firstly, there’s the higher cost of production. By its very nature, a reusable option will consist of more resources and will therefore not only be more costly to make, but also more durable and not so easily recycled. Even if used multiple times, it could well end up taking up more space in landfill than a single-use, compostable item. Then there’s the carbon footprint involved in transporting reusable packaging back and forth. And what if it also needs cleaning or disinfecting? How might customers feel about that in these times of global pandemics?

Upon closer examination, it’s clear that as far as some types of packaging are concerned, the answer’s not black and white.

Where does this leave the cardboard box?

According to three studies carried out by FEFCO in 2021, in ten out of fifteen impact categories, single use corrugated cardboard was proven to have a lower environmental impact than reusable plastic packaging. FEFCO therefore argues that any regulation undertaken by governments and other bodies should be on a case-by-case basis. Naturally, FEFO – The European Federation of Corrugated Board Manufactures – does have a vested interest in the cardboard box, but it makes a convincing case that cardboard has in-built sustainability and that regulatory policies should “incentivise sustainable packaging solutions that truly contribute to the green transition.” In other words, products shouldn't be heralded as the only solutions towards sustainability because they're reusable; the whole picture (from production to eventual retirement and disposal) needs to be taken into consideration.

Conclusion

We are moving inexorably towards a circular economy, the benefits and positive effects of which are impossible to dispute and actually, we think, are cause for renewed optimism and hope. However, it’s also a fact that in the years to come, we’ll rely increasingly on the world of e-commerce with the packaging industry “set to become a $1 trillion market by 2024” . Urbanisation is picking up pace, the middle classes in emerging economies are expanding and established consumer habits have gained traction and are increasing in momentum.

The packaging industry needs to transform and innovate in order to become a fully contributing part of that economy, but for the moment, its cardboard boxes remain viable. Amongst their many virtues, they’re sustainable, fit for purpose and recyclable. We would do ourselves a disservice if, in the initial chapters of the circular economy story, we only embrace dichotomous characters, restricting ourselves to the choice of heroes (multi-use) or villains (single use). The reality is far more complex. 

Transparency is key. E-commerce businesses and packaging companies don’t have to get everything right, but if they’re honest with themselves and their customers, the bumpy road through changing economic terrain can be smoother, especially if, at the end of it all, everyone will reap the rewards.

Here at The Packaging Club, we have several new exciting projects on the front burner which will help both our business and those of our customers to meet future sustainability goals together. If you’re interested in finding out more about these projects and understanding how we can work collaboratively towards a brighter, more equitable future, please contact us. But please contact us if you’re in the market for cardboard boxes as well. Developments might be afoot, but the cardboard box still takes some beating.

This article was written by...

Jo Hilton

I studied at the University of St. Andrews and have an MA in French and German. For a number of years, I worked for a Swiss financial institution and lived in Hamburg, London, Zürich and NYC before retraining as a primary school teacher and settling with my family in Cambridgeshire. When I'm not at school, I write content for various blogs and edit academic research articles for clients at ETH Zürich and the University of Munich. I'm also in the process of completing a Masters in Crime and Thriller writing at the University of Cambridge, so behind me you'll find a trail of fictional dead bodies and actual biscuit wrappers.

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